Print Reports Snow Readers On Housing
Reports hype November sales drop while ignoring that 2005 will break 2004 new house-sale record.

By Ken Shepherd
Free Market Project
Dec. 27, 2005

     The front page of the December 27 Investor’s Business Daily (IBD) joined other print outlets in blowing hot air on the so-called “housing bubble” with “Home Sales Plunge as Prices Pull Back and Supply Swells,” as reporter Kirk Shinkle painted a chilly winter landscape for the housing market.

     A few days earlier, a December 23 business report by the Associated Press similarly saw evidence of a “slowdown” while Bloomberg News blamed the report for cooling off a stock market rally. In the rush to hype the drop in November sales, Shinkle, the AP, and Bloomberg didn’t remind readers of October’s rapid run-up in new housing sales, that the 2005 housing market is breaking 2004’s record sales, and that month-to-month figures can be misleading or inconclusive about longer-term trends.

     The Washington Post reported a few days earlier on the 11.3 percent drop in sales in November over October, but the December 24 article also reported that “Even with the dip in November compared with October… total new-home sales were still 6 percent above November 2004, according to the government figures.” The Post’s Kirstin Downey added that “at this rate, about 1.25 million new single-family homes will be sold in 2005, up from the record-breaking 1.2 million sold in 2004.”

     Yet while a record-breaking year for new home sales is set to be eclipsed by yet another record-setting year for housing, that was not the take from IBD’s Shinkle, who wrote that, “New-home sales posted their worst drop in 11 years.” He further cautioned that “[a]side from happy shoppers…Friday’s economic reports looked less than merry.”

     Shinkle cited the same projected 2005 new-home statistic Downey used, but spun it in a negative direction, writing that in November, “new-home sales felt winter’s chill, diving 11.3 % to a 1.245 million annual rate, the slowest pace since January.”

     The IBD report was not the only print outlet to pour cold water on October’s hot housing market. An Associated Press report from four days earlier sounded an equally alarming note, warning that the drop in sales was “the most dramatic evidence yet that the red hot housing market … is beginning to cool down.” The AP noted the “month’s decline was even bigger than the 8.7 percent drop-off” that Wall Street had expected. The Christmas Eve edition of The New York Times, meanwhile, carried a Bloomberg News brief that attributed the end of the stock market rally in part to the housing report.

     Yet a month prior, The Washington Post’s Sandra Fleishman reported on government figures showing sales for October 2005 had leapt 13 percent over September, “a monthly increase not seen in a dozen years, according to a government report.” In her November 30 report on the October numbers, Fleishman voiced caution from unnamed experts, noting that the “unexpected burst of activity in sales of new homes, particularly a 47 percent rise in sales in the West, could be an error in reporting,” adding that experts say, “monthly new-home statistics are volatile and often subject to revisions.”

     Shinkle hyped one month’s aberrant statistics to hint at a housing bubble burst and warned new home building “might only add to a growing glut on the market.” That is only the latest example of the media eagerly misreporting the news to forecast a housing bubble burst which has not yet happened, despite four years of doom-saying. The Free Market Project placed the housing bubble myth as number five in its year-ending list of the Top Ten Economic Myths of 2005.  The November 30 Free Market Project study on housing bubble coverage is also available at FreeMarketProject.org.